Warren Buffett's Berkshire Hathaway (BRK.A -1.16%) (BRK.B -1.02%) has been buying shares of oil giant Chevron (CVX -3.02%) hand over fist. Buffett's company purchased another 2.4 million shares during the second quarter, bringing Berkshire's total to 161.4 million shares. That's about 8.4% of the oil company's outstanding shares, worth over $25 billion. 

Aside from providing Buffett with more exposure to the oil market, the other thing Chevron brings to the table is dividend income. It currently has a 3.6% dividend yield, more than double that of an S&P 500 index fund. Here's a look at whether this Buffett-approved dividend stock is right for other investors.

Drilling down into Chevron's dividend

Chevron has been an elite dividend stock over the years. It's a Dividend Aristocrat, a member of the S&P 500 that has increased its payout annually for at least 25 straight years. It's one of 65 companies with the Aristocrat title and one of only two oil stocks. Chevron most recently increased its dividend by 6% in January, its 35th year of dividend growth. It's up 20% since right before the pandemic and has doubled since 2010. 

That's impressive, considering the volatility in the oil market during that time. Oil prices have tumbled twice over the last decade, sending many other oil-fueled dividends lower. Chevron's ability to continue growing its dividend is a testament to the strength of its business model and balance sheet.

What has enabled Chevron's dividend to stand the test of time?

The company's first financial priority is to grow the dividend. It supports that payout with globally diversified integrated operations, including upstream production assets, midstream pipelines and storage facilities, and downstream refining and chemicals operations. This integration enables Chevron to capture more of the value of hydrocarbons as they flow out of wells and into gas tanks. It also helps offset some volatility since the demand for petroleum products tends to rise as crude prices fall.

Another crucial factor driving Chevron's ability to sustain its dividend is its strong financial profile. Chevron has an elite balance sheet. It has an AA credit rating, backed by low leverage metrics. It ended the second quarter with a net debt ratio of 8%, well below its 20% to 25% target range. That gives it the financial flexibility to maintain its dividend and capital spending during periods of low prices. 

Can Chevron continue growing its dividend?

While oil prices have been volatile over the years, demand for crude has steadily risen, enabling Chevron to grow its production. That might not be the case in the future. The economy is working toward shifting fuel sources to cleaner alternatives.

That's leading Chevron to invest in lower-carbon energy sources to complement its continued investments in traditional sources. Last year, it announced its low-carbon strategy acceleration, tripling its planned investment to more than $10 billion by 2028. It's investing in growing its production of renewable natural gas, renewable fuels, and hydrogen. It's also investing to increase its carbon capture and storage capabilities. 

The company believes its dual strategy will pay dividends in the coming years. It should enable it to continue growing its fossil fuels business to supply the economy with the energy it needs in the near term while increasing its ability to produce the fuels of the future. That should enable Chevron to continue growing its earnings and cash flow, positioning it to maintain its dividend growth streak.

A great dividend stock if you're OK with oil market exposure

While Chevron has been an elite dividend stock over the years, that's not the main reason Buffett bought the stock. He's seeking exposure to the upside of the oil market. Because of that, investors need to be comfortable with oil before buying Chevron for the dividend.

If they are, Chevron is an excellent option. It pays a higher-yielding dividend that the company should be able to keep growing for the foreseeable future.